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The likelihood of having your funding yanked because of a change in your stated or implied career intention is vanishingly small. This is an extremely unhelpful thing to say on the applications board, which is full of people who are very nervous about making a mis-step.
Believe me, as a new English PhD student I am very aware of the limitations of the job market in my field, and the necessity of thinking about other options. It is impossible to miss that message these days. We are not, however, discussing post-PhD transitions or ways to leave academia. We are discussing applications. Given the choice between two students, one with academic ambitions and one with alternate career goals, equal applicants in all other areas, the vast, vast majority of English departments would pick the aspiring professor. Why? Because the department resources for career development and placement are geared towards the academic market, and the student will be a better fit. Because if the student goes on to become one of the lucky group who find tenure track work, they will improve the department's placement rate, helping them attract better students down the line. Because the adcoms are made up of people who have chosen the academic path themselves, and believe strongly in its importance and the possibility of contributing strong work, even in a difficult market. Because students building up an academic CV are hungrier, and more likely to throw themselves in to grant applications, which relieve a financial burden on their department. I'm sure that many of these reasons are out of touch with market realities, some may be objectionable to you for various reasons, and of course there are exceptions to all of them. But this is the game that students are playing to get in. Once they're in, they can work towards whatever non-academic career goal they want. There is absolutely nothing wrong with presenting yourself in the most attractive light possible during the admissions phase.
I also think that your pessimism about the market is valid, but that it would be misplaced in an SOP. Am I going to be a tenure track professor? Likely not, but possibly. I'm going to go into my program and work my ass off to try. (And heck, my program has a 50% TT placement rate, so there's a good chance.) There's no value in giving in to despair before a degree has even started. That's advice that came from my youngest, most flexible and liveliest mentor, not the old boy's club. Why present yourself as already hedging your bets?
The short version: While the purpose of training in the humanities and the future of the job market are important and complicated questions, when it comes down to the simple strategic decision of how to present your ambitions in your SOP, expressing an interest in academia is the best choice.

It absolutely does. You have years and years of experience built up at home... you know the best places to walk, to eat, to hang out... you have a deep affinity for the landscape, the quirky local habits... there's no way that you can instantly replace that with a new place. Seeing a place as 'home' takes a long time. Slowly but surely, you will start building up a similar list of things you love about your new city, things that you can't see right now but that will unfold for you over the months and years. Then your new city will feel like a second home. In the meanwhile, keep busy, do good work, and force yourself to accept every invitation to go out and socialize, whether that means a dept. function or beer with a classmate. Those are the best cures for homesickness I've found.
((MDLee))

This. Absolutely. It will also push you to improve your writing and research skills, and get you some specialized attention from a professor. It will absolutely help you grow as a scholar, which is the important thing in the end.

Yes, you're right. But the only job that it directly qualifies you for is being an academic (CC teaching included in that category). A lot of people do other things, but that's not the purpose of the degree. It's research training. Given that the people on the adcom are almost certainly heavily involved in research, I don't think that saying you want a PhD in English for any other reason than becoming a research academic would impress them or help your app. Of course everyone has and should have plans B, C, and D, and be open to other working options. Again, though, I wouldn't waste space on the SOP hemming and hawing about various possibilities.
My SOP instructions did not ask specific questions about career goals, though. (Here's where I mention the fact that I'm a Canadian studying in Canada for the kazillionth time.) It's probably best to check with someone who deals with that style of SOP.

Ah! I may have accidentally given field-specific advice without realizing it. I'm in English. There's only one thing it directly qualifies you for: academia. So saying "I really want to do this PhD so that I can be an English professor" is like saying "I really want to take your xerox maitenance course so that I can maintain xerox machines". For me, it's a question of efficient use of space and showing, not telling. Why would I spend a thousand words outlining my specific program of Victorian lit research and then go and be redundant by making the shocking claim that I'm doing it because I want a research position in Victorian lit?
If you get specifically asked what you want to do, then of course you should mention your academic or industry plans. I have just never seen that question asked directly.

You still get references from your undergraduate professors. If you haven't spoken to them in a while, try dropping by their office hours or e-mailing them an update about what you have been doing since graduation. Even if you're changing fields, there are still several useful things that they can attest to: your research skills, writing ability, and scholarly potential. Many LOR forms have fields that work supervisors are not qualified to comment on, like your teaching potential. There are cases where work references would be good--if you're going for an Ed degree and have people who have observed your teaching, or even if you worked in a biology research lab run by academics but are now applying for a different science field. If you're applying for a professional master's, things may be different. But if you're applying for a research degree, you need references from researchers (that is, academics).
I can't parse the degree you have listed on the side there, though, so my advice may be way off. What field are you applying to study? If it's business related, work references might work, but I'd check with the folks on the business board.
Non-academic experience is hugely helpful in a number of intangible ways, but it does not generally help you get admitted (except potentially to professional or business degrees). I know a woman who worked for years in naturopathic health, for example. She is working on a PhD in the rhetoric of health. Her years of work gave her tons of valuable background, maturity, experience with people, and a broad sense of the discourse. That's absolutely not what got her admitted, though. Her undergraduate grades and references got her in, and her experience is helping her succeed and finish.
You can mention your professional experience and how you feel it has prepared you for graduate work in your SOP, and you can list your professional experience on your CV. But your references need to be from academics.

It's not disrespectful at all. If you think about it, there are many doctors who never get tenure track, so professors are actually a lucky and dedicated subset of all doctors.
Also, we use first, second, and third year at all Canadian schools. I'm sure there are many subtle differences in language between regions. Since professors deal with people from out of state and out of country all the time, they will easily figure out any differences, and will almost certainly not take offense. As long as you are generally polite and sincere, you will be fine.

Go with the one who can best attest to your ability to do research and excel in advanced studies. I assume that your work is directly related to your studies. If it isn't, drop the work references altogether.

Do: Prove that you know what scholarly research in your area looks like, and prove your ability to complete similar work.
Don't: Try to substitute generic excitement for a broad area of interest for a somewhat focused research plan.
Do: Use active, assured language. "My research will do X."
Don't: Hedge your goals in qualifiers. "At the moment, I feel that I may be able to partially do X."
And the top ten ways to cut your SOP down to size without sacrificing content:
1. Eliminate as many modifiers as possible, especially those that are redundant to a specialized audience (ie: modernist author James Joyce).
2. Look for long verb phrases and replace them with simple, direct language.
3. Don't waste time talking about anything that goes without saying. You are passionate about the material? You want to be a part of academia? Join the club.
4. Don't waste time mentioning anything that is already covered in your CV, letters of reference, or any other part of the app package.
5. Be confident enough in your grasp of the field to make claims about the direction of research generally without feeling the need to back them up meticulously. This isn't a research paper.
6. Write as though you are already a researcher. After all, you are (albeit a junior one). This will make you sound confident AND cut down your word count. Compare "At the end of my course work, I hope to be able to better articulate the connections between postcolonial theory and Jamaican literature, and move towards a potential dissertation dealing with one or more aspects of these connections" with "I intend to continue my work on Jamaican literature using postcolonial theory."
7. Show, don't tell. This is an old piece of writing advice, but an excellent one. Instead of telling them that you're an ideal candidate ("I am an ideal candidate because of my experience, my passion for research, and my dedication to the field"), SHOW them those characteristics through your writing. Include a few sentences about your experience, and let your passion and dedication shine through the whole statement. Ad coms are made up of smart people. No need to connect the dots for them.
8. Get right to the point. Remember that your audience is a group of highly trained people who have been reading dozens and dozens of these damn things in their 'free' time, who are likely cranky and tired. Make your writing as crisp and tight as possible to keep their attention. Try having a friend read your statement on a noisy bus with a five minute time limit after a long day. Does it still make sense?
9. Get editing help from the most ruthless source possible. Take all suggestions that involve cutting content, and only the best suggestions about what to expand.
10. Give yourself several weeks of time to revise the statement in order to get emotional distance from your writing. What seemed utterly central and impossible to cut the day you wrote it may reveal itself as somewhat flabby prose a week or so later. Give yourself breaks from the editing process. They will clear your eyes.

There are a couple of short quotes in my SOP-- an epigraph from the author I will be studying and a nice, concise definition of the methodology I use-- and I definitely cited them in the normal style for my discipline. Seems pretty standard. For brevity's sake, though, try not to go into too much detail about who you're building on to save the space for talking about your novel ideas. You can name drop in parentheses. For example "Many critics have explored the impact of Darwinism on Victorian literature (Jones, Smith, Black), but none have yet applied this concept to (massively exciting text)." I've seen this format again and again on sample grant apps, and had many professors encourage it. I also attached a one-page bibliography to my SOP, sketching out key critical works. They may throw it out, but it can't hurt.

Are you in town? You can always drop by their office hours and have a chat. It refreshes their memory, and lets you talk about your grad school plans and potentially get some useful advice. If you're not in town, try sending a slightly longer e-mail telling them what you've been doing since graduation and why you want to do grad school, or attach a CV of what you've been up to.
Don't worry about this. First of all, writing rec letters is part of their job. Second, once they've written the letter, it's really no problem to just print it off and send it again. It's not an unreasonable burden. There are many people on these boards who have applied two or three times before they get in. And once you're in, you'll be relying on letter writers for awards, grant applications, post docs, job references, etc. Multiple requests are absolutely normal.
Then don't let em! In case it's not already clear, the fact that he dropped off the face of the earth has absolutely nothing to do with your ability as a student. Many of my friends have dealt with late or missing letters from some of their biggest supporters. The absentminded professor stereotype exists for a reason. Make sure to politely but persistently follow up with your letter writers and make sure the letter gets there.
I would avoid letters from employers unless you have a research job related to your potential grad field, or are doing a professional master's and have related work experience. You need people who can attest to your academic ability.
This is totally do-able. Just re-build your bridges and be confident! Best of luck.

Ah, that makes more sense. Thanks, belowthree. And sorry for unintentionally slagging comp sci... I just grabbed at what seemed to my flaky brain to be the most likely possible reason for the difference. Maybe it's more a function of class size? I certainly didn't mean to imply that your *field* is all transmission of information, simply that some of your larger grad *classes* may be.
If the question is whether "academia was so cohesive a beast as to blackball an individual if they did in fact unknowingly do something rude in their field like crash a course", I think that it varies case by case. In my opinion and in my field, crashing a graduate course would be so egregiously rude and make the crasher seem so oblivious to insitutional norms that yes, it would probably keep them from getting admitted to that program in the future. While the hypothetical crasher could probably find a home somewhere else, academia is a small world and you never know if the new DGS will have received an e-mail from their best friend at Crasher U complaining about what some crazy person did. The right person with the right amount of charm could talk their way out of it, for sure. But many couldn't, I think.
So much of the role of letters of recommendation and interviews is to figure out whether or not you're crazy. People don't want to bring someone in who will end up driving the department nuts for eight years. If you ever get a chance to read a wide selection of letters of reference, you will be amazed at how many of them talk about the student's sense of humour, temperament, etc. People are casually checking out the personal histories of prospective grad students and prospective hires all the time. They ask colleagues from the same town if they knew them/knew of them, ask people who have been in contact with them if they were helpful and polite, ask the secretaries if there's anyone who has come across as a potential problem. So yup, a big lapse of professionalism or act of rudeness (intentional or not) can absolutely hurt your chances. After all, it's competitive, and they may as well take the nice, professional, scrupulously polite girl with the 4.0.